When $50 converts better than $49.95

Why is it that some startups price their products ending in $.99, while others end in $.00? Can it really make a difference?

The $.99 trick has been around for decades. When our brains see $9.99, we associate the price to the $9.00 – $9.99 range, but not $10.00. We need to mentally tell ourselves $9.99 is one cent less than $10.00, otherwise it won’t feel like $10.

Shoppers may not want to jump to a new price category, so even one penny can make a difference.

So it’s settled then. Price your products or services to end in $.99. Right?

Well, not exactly. With every rule comes exceptions and new data to disprove the rule.

In a peer reviewed study published in the Journal of Consumer Research, “This Number Just Feels Right: The Impact of Roundedness of Price Numbers on Product Evaluations” revealed that round prices actually outperform their $.99 counterparts in specific scenarios.

The study found rounded prices – those written like $20, not $19.99 – encourage a reliance on “feelings”. Non-rounded prices – those written like $19.99 – encourage a reliance on “cognition”.

Based on this data, picking whether to use rounded or non-rounded prices really comes down to the product or service you’re selling.

Utilitarian products, such as USB cables, paper towels, nails, or even API services, may perform better using non-rounded numbers, like $9.95.

But, hedonic offerings, luxury products or offerings with positive emotional sentiment, like candles, clothing or homemade products, perform better with rounded numbers, like $10.

Action items

  • If your product or service leans more pleasant or hedonic in nature, consider updating the pricing to use rounded numbers
  • If your product or service is utilitarian in nature, consider updating your pricing to use non-rounded numbers